Qualcomm on Tuesday struck a $60 billion deal with Amazon for the San Diego company\u2019s AI data center chips, with Amazon also picking up the right to buy $4 billion of its stock.<\/p>\n
\u201cWe used to be a smartphone company,\u201d Qualcomm CFO and COO Akash Palkhiwala said at the Goldman Sachs investors summit in San Francisco, outlining the company\u2019s billion-dollar plans to replace its sunsetting smartphone revenue with data center deals.<\/p>\n
Analysts responded by pushing Qualcomm\u2019s stock up over 3% Tuesday to $174.09 at market close. \u201cThis is the day investors get to stop mourning Apple,\u201d said Daniel Newman, Futurum CEO. Others were more cautious, explaining how this \u201cbig deal\u201d is just the chip company executing on what it initially promised investors.<\/p>\n
Smartphone sales currently make up 70% of Qualcomm\u2019s revenue, but the company projects that share will shrink to about a third by 2029 as Apple\u2019s split from Qualcomm becomes final in seven months. Data centers are expected to fill that gap \u2014 a shift Palkhiwala acknowledged directly.<\/p>\n
\u201cObviously investors are very focused on data centers,\u201d he said.<\/p>\n
During Tuesday\u2019s panel, analysts recited Qualcomm\u2019s data center revenue targets back to the executive \u2014 $5 billion by 2027, growing to $15 billion by 2029 \u2014 and asked Palkhiwala how the company plans to get there.<\/p>\n
Historically, data centers used one type of chip for all kinds of tasks \u2014 everything from building new AI models to running a Google search were processed on the same kind of chip.<\/p>\n
But now, in the age of AI and constrained computing power, tech companies have shifted to specialized chips that are more efficient at specific tasks.<\/p>\n
Qualcomm\u2019s niche is low-cost, low-power inference computing \u2014 the everyday processing tasks like translating Spanish to English or asking a question of ChatGPT.<\/p>\n
This kind of quick low-power computing occurs in data centers and on-device. Qualcomm is creating the chips for both.<\/p>\n
The near-term $5 billion benchmark has all but been met, Palkhiwala said, pointing to the silicon being produced and shipped now for Saudi Arabian AI company Humain, among other customers.<\/p>\n
Earlier this year, Meta agreed to buy custom Qualcomm silicon starting in 2028; exact terms of the deal were not disclosed.<\/p>\n
\u201cAnd today is a key milestone, obviously, with our very large deal with Amazon,\u201d Palkhiwala said.<\/p>\n
Qualcomm struck a deal with Amazon Web Services, the companies cloud computing division, to purchase up to $60 billion worth of Qualcomm chips over the next 10 years. As part of the agreement, Qualcomm also gave Amazon the right to buy $4 billion worth of stock \u2014 25 million shares at $161.26 apiece, which become available to Amazon as it hits agreed-upon milestones.<\/p>\n
Of those, 3.75 million shares vested immediately when the deal was announced. Stacy Rasgon, an analyst at Bernstein, did some back-of-the-envelope math and estimated those shares imply an initial $9 billion commitment in sales from Amazon.<\/p>\n
Equity agreements baked into deals like this are becoming increasingly common in the industry, said Newman of Futurum, pointing to similar stock-interest arrangements struck by competitors AMD and Marvell. But he said\u00a0this deal signals something greater.<\/p>\n
\u201cAmazon does not take equity in a vendor it plans to test-drive,\u201d Newman said. \u201cA company that has a deep bench, in-house chipmaking and financial resources aligning to Qualcomm can only be viewed as one thing \u2014 a net positive.\u201d<\/p>\n
Rasgon was more restrained. \u201cIt does not appear that this deal is incremental to existing targets,\u201d he said, noting that Qualcomm had promised hyperscaler partnerships during its investor day and is now delivering on that promise. The Amazon partnership had been widely speculated, he added: \u201cThis deal may help provide more proof points for current targets.\u201d<\/p>\n
On stage, Palkhiwala hinted at another hyperscaler up its sleeve \u2014 one he did not name, but described as a \u201cvery strong engagement.\u201d<\/p>\n
\u201cWe outlined a compelling strategy \u2026 We\u2019re executing on everything we said we\u2019d execute on, and hopefully today\u2019s announcement gives people a lot of confidence.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Qualcomm on Tuesday struck a $60 billion deal with Amazon for the San Diego company\u2019s AI data center…\n","protected":false},"author":2,"featured_media":457676,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[28],"tags":[387,181,74,76,75,1970,1696],"class_list":["post-457675","post","type-post","status-publish","format-standard","has-post-thumbnail","category-san-diego","tag-business","tag-latest-headlines","tag-san-diego","tag-san-diego-headlines","tag-san-diego-news","tag-technology","tag-top-stories-sdut"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/457675","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=457675"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/457675\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/457676"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=457675"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=457675"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=457675"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}